Consciously, making the decision to become the best investor you possibly can, will be your highest goal. It will help you make better decisions. Taking time to go through the guides we have provided for you at social trading secrets is a good step in this direction. On this page, we have prepared some of the tips and tricks that will help you to become a better investor on eToro. Take your time to read them and develop your investment plan accordingly.
Set your own goals
The most important part of any task is to know what you are doing and why. It is no different with social trading. You should be able to describe what you want to get out of social trading with clarity. You want to define your investment goals clearly from the moment you start, so that you can easily determine the following :-
- Who can help you meet them (traders and followers)
- When your investment goals are being met
- When they are not being met
- How to review and optimize your eToro activity in order to meet your goals
When defining your goals, you can have as many or as few criterias for measuring your performances as you want. Remember, it is your capital on the line and you have the final say. Here are some of the criterias you can use to define and measure your investment goals.
- Return on investment. The return on investment is the profit you gain over a given period expressed as a percentage of the initial amount at the beginning of that period. You can choose to define your investment goals in terms of how much return on investment you want to gain.Keep in mind that eToro gain is not equivalent to return on investment. The formula they use employs a weighted return and does not give you the actual return on investment. This can be misleading, so it is important to do your own calculations. For more information on the method used on eToro, please see the section on estimation of returns on the ‘eToro trader selection’ page.
- Risk tolerance. This is simply the amount of risk you are willing to take on. You should determine in your goals how much risk you are going to expose yourself to before you begin trading. The risk tolerance will determine the amount of money you deposit initially and the way you allocate that money among the traders you follow. Your risk tolerance will also tell you which traders you want to follow based on their historical risk profile.
- Traders to follow. The traders you follow will ultimately be the single most important factor in determining your success or failure. Take time to determine the types of traders you want to follow. For an in-depth guide on how to select traders, check out the eToro ‘selecting social traders’ page.
- Account monitoring. It is important that you set goals on how you will monitor your account. These goals can be in terms of a plan and a schedule of the time you will allocate for social trading. See the sections below for details on how you can monitor your account.
Spend more time learning
One of the biggest mistakes that new investors make when they are starting out is assuming that they already know how to trade. Smart investors take the time to learn how to do their job. You will find it very beneficial to take some time to study the best methods to use on eToro. Here are some of the steps you can take.
- Familiarize yourself with open book. You will be using the eToro’s open book platform to follow your account’s progress so get yourself familiar with how it works before you start live trading. Trade with virtual money and see how well you are able to use the platform. Make sure you can perform all the basic trading functions within the platform.
- Check out the social trading videos in order to familiarize yourself with the basics of social trading on eToro.
- Check out the trading interactive courses available on eToro. There is a wealth of information available both for traders and for investors. If you are a new investor, take time to see what skills you can learn from the resources available.
- Make a point to check regularly for new webinars. Every now and then, you will find a webinar that catches your attention and that you want to attend. Being a regular attendee of these webinars will undoubtedly increase your knowledge and this will enable you to make better investment decisions on eToro.
- Take time to go through the articles on this site which is related to eToro and social trading in general. You will notice that doing this regularly will enable you to gain knowledge and quickly learn the best trading practice. Also, please make sure you see the ‘eToro review’ page for an in-depth analysis of eToro and an overview of what to expect from the platform.
***eToro allows you to practice trading with virtual money. We recommend that you take some time to use virtual money to gauge how well you could perform on eToro. Of course, theoretical returns do not indicate future performance on live trading but it will enable you to get better at using the platform.
It is a good idea to use a realistic amount or that which is close to the money you will be depositing in order to get the best estimates for what you are actually capable of. It will also help you determine beforehand how to allocate your capital and control risk.
Use the Discover People Tool
We have found that searching for traders to follow, to be dramatically easy when using this tool. You want to check it out when locating your traders and we have no doubt that it will be more useful compared to the other search and ranking tool.
With the ‘discover people tool’ on eToro, you can define your own search parameters that you want to see in the columns and arrange them according to your level of importance. There is an in depth description of this tool on the comprehensive ‘eToro review’ page on this site.
Following up and monitoring your account
When will you check and evaluate the progress of your account? It is important that you set aside a specific time in your schedule to do the required follow up. We cannot possibly over emphasize this point! You need to monitor your account. As an investor, you ought to take full responsibility for your own success in social trading. Setting aside time to manage capital allocation is an important part as well as success in this area.
Ask yourself these questions
- How much time will I spend on eToro per day?
- How much time will I spend following up on my account per week?
- How do I want to review the progress of my account?
- What performance indicators will I look at?
- How will I monitor new traders to add to my people’s portfolio?
Answering these questions will help you come up with a plan for achieving your goals and crucially spend the required time on eToro efficiently. Make sure you take time to answer them.
For you to attain consistent results, it is important that you look for consistency in the traders you copy. Check to see if the trader has been having consistent returns over the last six months to a year. Can you tell whether the trader is following their trading strategy always? If the trader has provided a description of their trading strategy, they should follow it strictly. If they have not described it, whatever strategy they are using ought to have a relatively consistent performance in terms of outcome.
Another thing to check for in a trader is how they deal with losing trades and how much risk they take on. We have dealt with this issues in great details in the eToro ‘selecting social traders age’ page. Do take time to go through the information provided there.
It is equally important that you let your plan work out. After you have done your due diligence and selected the traders that you feel are the best to copy, give them time to perform as you had projected. Some investors are too quick to switch traders the first time they see a loss in their account. Remember, losses are as much a part of the business as profits. To be a smart investor, it is important to have a longer-term perspective on trading. We would recommend to only switch a trader when you are confident that the trader can no longer help you attain your investment goals or if there is another one that you are confident can do better. There is no other reason to switch traders. Losing money in the short term is not a good enough reason unless it demonstrates incompetence.
Just like in any other business, to attain success in social trading requires you to use the best practices of the trade. It is important to make yourself a better investor according to your own defined goals. In the long run this approach will ensure that you attain a level of excellence that most investors cannot achieve.